Termination of Pension Plans by Bankrupt Companies Is Too Easy Under the Current Law According to Latest ABI Poll
Contact: John Hartgen
TERMINATION OF PENSION PLANS BY BANKRUPT COMPANIES IS TOO EASY UNDER THE CURRENT LAW, ACCORDING TO LATEST ABI POLL
October 12, 2011, Alexandria, Va.— A majority
of respondents in a recent ABI
Quick Poll believe that it is too easy under current law for
bankrupt companies to terminate pension plans. Fifty-four percent agreed
(37 percent “strongly agreed” and 17 percent “somewhat
agreed”) that it is too easy under the Bankruptcy Code for
companies to terminate pension plans.
In 1984 the Supreme Court in NLRB v. Bildisco, 465 U.S. 513 (1984), confirmed that collective bargaining agreements, which include pension plans, can be rejected under §365 of the Bankruptcy Code. The Court determined that the debtor in possession must satisfy something more than the often-used “business judgment” test, but did not require the stricter standard that the labor unions were seeking. In response to Bildisco, Congress enacted §1113 of the Bankruptcy Code. Section 1113 removes collective bargaining agreements from §365 and instead provides specific requirements a debtor must fulfill in order to reject a collective bargaining agreement in bankruptcy. The recent ABI poll suggests that Congress may not have gone far enough to protect collective bargaining agreements from rejection in bankruptcy. In a related 2006 Quick Poll, 63 percent of respondents agreed that the practice of corporate debtors shedding their defined benefit pension plans onto the Pension Benefit Guaranty Corp. (PBGC) is an abuse of the bankruptcy system.
Thirty-eight respondents to the current poll disagreed (30 percent “strongly disagreed” and 8 percent “somewhat disagreed”) that it is too easy under the current law for bankrupt companies to terminate pension plans. Five percent “did not know or had no opinion” on the question.
ABI’s Quick Poll is posted on ABI’s home page, www.abiworld.org. ABI members and the public are invited to respond to a question on a timely bankruptcy or insolvency issue. Visit http://www.abiworld.net/quickpoll/ to access the results of previous ABI Quick Polls.
ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes over 13,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abiworld.org/conferences.html.